Coinbase and Binance embroiled in US regulatory battle

The cryptocurrency industry in the United States is facing an increasingly complex regulatory environment. Recently, two major trading platforms were sanctioned by U.S. regulators for allegedly violating different regulations, highlighting the jurisdictional disputes among the regulatory agencies.

On March 22, a well-known cryptocurrency exchange received a warning notice from the U.S. Securities and Exchange Commission (SEC), accusing it of violating securities regulations. The SEC maintains that cryptocurrency assets fall under the category of securities. Just a few days later, another large trading platform and its founder were accused by the Commodity Futures Trading Commission (CFTC) of violating commodity trading regulations, with the CFTC considering some popular cryptocurrencies to be commodities.

This series of events indicates that as the jurisdictional battle between the SEC and CFTC intensifies, the operating environment for cryptocurrency companies in the United States has become more complex. Since the collapse of a certain trading platform in November 2022, both regulatory agencies have adopted a more aggressive stance towards the crypto industry, asserting their jurisdictions through enforcement actions.

Former White House Chief of Staff Mick Mulvaney stated: "If people want to know what the regulatory attitude was at the beginning of the year, now they know it is hostile. I think the collapse of a certain platform is not the reason, but an excuse."

Since the beginning of this year, the SEC has initiated a series of lawsuits against cryptocurrency companies and individuals in the United States. In January, the regulatory agency accused a certain exchange and lender of providing unregistered securities issuance services. In February, another exchange agreed to halt its reward program to reach a settlement. The SEC also warned a certain company of its intention to file a lawsuit regarding its stablecoin. In March, the SEC accused a blockchain founder of engaging in market manipulation activities and accused several celebrities of illegally promoting related tokens.

Mulvaney believes that the SEC is demonstrating its power through enforcement actions to strengthen its claims against the industry, but this approach has lost its fairness. Even within the SEC, there are disagreements on how to handle cryptocurrencies. SEC Commissioner Hester Peirce has publicly opposed several crypto-related actions, calling for a compliance pathway instead of taking enforcement actions after the fact.

At the same time, the CFTC is increasing its regulatory efforts in the cryptocurrency industry. CFTC Chairman Rostin Benham stated that this should serve as a warning to the world of digital assets that the CFTC will not tolerate willful evasion of U.S. laws.

In the absence of clear guidance from Congress on regulatory authority, cryptocurrency companies must try to anticipate complaints that may arise from two directions. However, due to the lack of clear guidelines for cryptocurrencies, this becomes exceptionally difficult.

Cryptocurrency companies are frustrated by the fierce criticism of regulations and are calling for clearer and more comprehensive rules. The chief legal officer of a trading platform stated that interactions with the SEC feel more like a "one-sided monologue" rather than a dialogue. He emphasized that they are not seeking special treatment, but simply wish to register and comply with strict standards.

Industry insiders believe that a better solution is for the U.S. Congress to enact comprehensive cryptocurrency legislation. While regions like the European Union are advancing crypto legislation, the U.S. has fallen behind in this regard. Mulvaney stated that it is unlikely that comprehensive cryptocurrency legislation will be passed this year before the 2024 presidential election.

Amidst the ongoing uncertainty in the regulatory environment, some cryptocurrency companies have begun to consider relocating their operations overseas. Some companies have announced plans to establish their headquarters in Europe, while others are planning offshore versions of their trading platforms.

SEC Commissioner Peirce emphasized that the goal of regulators should be to facilitate safe technological experimentation, rather than pushing the cryptocurrency industry overseas. She called for all parties to "talk like adults" and work together to find solutions, rather than simply asking companies to "come in and register."